The United States and Japan will step up their defence cooperation to deal with the threat from nuclear-armed North Korea as tensions in East Asia remain high, officials from the two allies said on Thursday.

NSW economy gaining momentum

It would seem the renewed strengths of NSW go beyond Super 15 rugby and the State of Origin.

As the NSW Waratahs gear up for the semi-finals, two new reports show the nation's most populous state is again flexing its muscles and fast gaining ground on the mining states that have dominated Australia's economic landscape for some years.

Commonwealth Securities says the NSW economy certainly has momentum in terms of population growth and therefore home building.

"NSW is also still playing catch-up after under-building for a number of years," its chief economist says in his latest State of the States report released on Monday.

Deloitte Access Economics economist Chris Richardson agrees, saying NSW is getting its act together with low interest rates generating better news in both retailing and housing construction, as well as better times in the state's finance sector.

However, in his latest Business Outlook he says Western Australia, Queensland and the Northern Territory still have the economic growth "bragging rights" for now.

That's because flagging mining investment is being matched by the export phase of the resources boom.

Western Australia remains Australia's best performing economy followed by the Northern Territory and NSW. The next grouping is Queensland, Victoria and the ACT, while the final grouping is South Australia and Tasmania.

"While the expectation was that Western Australia would slip down the economic rankings ... (it) still leads the performance rankings on two of the indicators and is second or third on five other indicators," Mr James said.

The ACT is holding up at this stage, despite the expected impact from the federal budget cuts.

Mr James said the nation's capital is being underpinned by low unemployment but weak confidence is constraining retail and business spending.

Mr Richardson said the good news was that the May budget didn't add many more public servant cuts.

"But the bad news is that public service numbers will fall from here," he said.